The New Silk Road’s emergence and some related institutions

_ Stephan Barisitz,  Senior Economist, Foreign Research Division, Austrian National Bank (OeNB); Alice Radzyner, International Relations Specialist, European Affairs and International Financial Organizations Division, Austrian National Bank (OeNB). Published in parts from their article “The New Silk Road, part I: a stocktaking and economic assessment” in the OeNB research journal “Focus on European Economic Integration” (Q3, 2017) with the kind permisson by the the authors. Vienna, 9 April 2018.

China’s New Silk Road (NSR) initiative was officially launched in 2013. It aims at enhancing overall connectivity between China and Europe by both building new and modernizing existing – overland as well as maritime – infrastructures. The NSR runs through a number of Eurasian emerging markets with important growth potential. The Chinese authorities have entrusted the Silk Road Fund, the Asian Infrastructure Investment Bank and other institutions with financially supporting NSR activities. Most drivers of the initiative are of an economic or a geopolitical nature. Given the generous financial means at Beijing’s disposal and Chinese firms’ accumulated expertise in infrastructure projects, many undertakings are currently well under way and promise to (eventually) bring about considerable changes in connectivity, commerce and economic dynamism. While most Chinese NSR investments go to large countries (e.g. Pakistan, Malaysia, Indonesia, Russia, Kazakhstan and Kenya), the strategically situated smaller countries (e.g. Djibouti, Sri Lanka, Kyrgyzstan, Laos, Serbia and Montenegro) typically benefit the most (in relation to the size of their economies). Progress has been made in strengthening the maritime infrastructural trade links with the EU (e.g. through the modernization of deep-water ports) while the upgrading of the currently rather weak trans-Eurasian railroad and highway links (e.g. via Kazakhstan and Russia) is clearly improving overland transportation’s yet modest competitive position.


This study is the first of a set of twin studies on the New Silk Road (NSR).2 In part I, we provide a project-oriented overview of China’s initiative to establish a New Silk Road linking China and Europe via a number of Eurasian and Asian emerging markets with important growth potential. In part II, we focus on the NSR’s implications for Europe, or more precisely, Southeastern Europe (SEE), through which it connects to the heart of the continent. We feel that our brief discussion of concrete projects can provide valuable geoeconomic and geopolitical insights that help us understand the motives, goals and implications of this major endeavor. As far as we know, no other study has yet analyzed the NSR’s impact from a project-oriented perspective, i.e. based on essential details of salient NSR projects in various parts of Eurasia and Africa. This contribution is intended to facilitate grasping the overall (potential) connectivity impact of the (strived-for) substantial modernization of trading networks.

Part I is structured as follows: Section 1 describes the most important features of the NSR, which is officially called the “One Belt, One Road” (OBOR) initiative, and the respective Chinese or multilateral financing institutions. Some motivations and reasons, but also risks and limitations, of the Chinese initiative are subject of section 2. Section 3 provides a snapshot of the approximate locations of the “economic corridors” of the NSR and a succinct discussion of the economic advantages and drawbacks of competing modes of transport, with important implications for OBOR projects. It also analyzes some major OBOR projects. Section 4 finally summarizes and draws some conclusions which help prepare the ground for part II.

1 The New Silk Road’s emergence and some related institutions

1.1 Origins and nature of intended cooperation

When China’s president Xi Jinping visited Central Asia (Kazakhstan) and Southeast Asia (Indonesia) in September and October 2013, respectively, he launched the initiative of jointly building the Silk Road Economic Belt (SREB, a Eurasian overland trading network linking China and Europe and modeled on its ancient prototype) and the 21st Century Maritime Silk Road (a complementary seaborne trading network). Both networks together make up the New Silk Road (NSR) or the One Belt, One Road (OBOR) initiative,3 which focuses on connectivity and economic cooperation along infrastructural trajectories and comprises the establishment or modernization of port, rail, road, pipeline, energy, communication and IT infrastructure and logistics. The Chinese government described OBOR as the third stage of China’s opening up after the development of Special Economic Zones from 1980 and the country’s accession to the World Trade Organization (WTO) in 2001.4

The SREB focuses on bringing together China, Central Asia, Russia and Europe, on connecting China with the Persian Gulf and the Mediterranean Sea through Central and Western Asia, and on linking China with Southeast Asia, South Asia and the Indian Ocean. The 21st Century Maritime Silk Road is designed to go from China’s coast to Europe through the South China Sea and the Indian Ocean, connecting China with Southeast Asia, South Asia, East Africa and the Mediterranean (see State Council – The People’s Republic of China, 2015, p. 2). OBOR is sometimes compared to the Marshall Plan, a very successful U.S. initiative worth approximately USD 130 billion (in 2015 terms) that was aimed at promoting the economic reconstruction and integration of Western European economies after World War II (Djankov and Miner, 2016, p. 6). However, Chinese aspirations appear far more extensive, if more vague: The authorities in Beijing assess that OBOR potentially involves 65 countries in Asia, Africa, the Middle East and Europe and 4.4 billion people or about 60% of the world’s population (Grieger, 2016, p. 4). Enhancing connectivity in an area that generates an estimated 50% of global GDP and boasts about three-quarters of known energy reserves may have a significant economic impact.5 Estimates identify infrastructure construction needs exceeding USD 800 billion (Ettinger, 2016, p. 33).

The OBOR (or NSR) initiative is to be implemented through promoting intergovernmental cooperation and policy coordination (unlike the Marshall Plan, this initiative has made no demands for explicit trade policy liberalization steps of participating countries). Within this framework, the Chinese authorities have set up or contributed to setting up specialized institutions to support and finance NSR projects (see subsection 1.2). Chinese enterprises are encouraged to participate in infrastructure construction in other countries along the OBOR and make industrial investments there. The Chinese authorities, at least in theory, also support “localized operation and management of Chinese companies to boost the local economy, increase local employment, improve local livelihoods” (State Council, 2015, p. 5). Yet in fact, given that China typically covers most of the financing, management is often in Chinese hands and the bulk of construction work is frequently carried out by Chinese firms and their workers, sourcing Chinese equipment, which is not always appreciated by local project partners (see also section 2).

1.2 Selected institutions supporting the New Silk Road

A number of institutions, mostly Chinese, but partly also multinational, are entitled to finance OBOR projects:

  • The Silk Road Fund (SRF): In December 2014, China’s government established this development and investment fund domiciled in Beijing. The Chinese authorities injected USD 40 billion of capital, which was provided by the State Administration of Foreign Exchange, the Chinese Investment Corporation, the ExportImport Bank of China (China EXIM Bank) and the China Development Bank.6 The SRF took up operations in spring 2015 and is being used to acquire equity stakes in infrastructure, resource development and industrial cooperation ventures in countries along the NSR. By March 2017, it had invested more than USD 6 billion in OBOR projects.
  • The Asian Infrastructure Investment Bank (AIIB): This institution, based in Beijing, started to operate in January 2016. By March 2017, the multilateral outfit had 52 members and 18 prospective members, including many countries along the OBOR, among them a number of European countries. China is the single largest shareholder, accounting for 26.1% of voting rights, followed by India (7.5%), Russia (5.9%) and Germany (4.2%). The AIIB’s authorized capital is USD 100 billion. The AIIB has challenged the regional if not global governance paradigm by claiming its own ground alongside the Japan-dominated Asian Development Bank (ADB) and the World Bank (WB), in which the United States holds preeminence (Grieger, 2016, p. 6).7 In early 2016, the first projects were initiated and received loans (albeit in partnership with other institutions, including the WB). By March 2017, 12 projects had received AIIB financial support totaling USD 2.6 billion. The institution apparently plans to contribute around USD 12 billion to the NSR initiative (Djankov and Miner, 2016, p. 9).
  • The New Development Bank (NDB): This multilateral lending institution was established in 2014 by the BRICS countries (Brazil, Russia, India, China and South Africa) and equipped with USD 100 billion. NDB headquarters are in Shanghai. Business started in 2016; at end-2016, projects in all member countries had been approved, involving financial assistance of about USD 2 billion. Around USD 10 billion of NDB money may be earmarked for NSR projects.

The Chinese authorities have reportedly allocated the following amounts for use in OBOR projects to the country’s “policy banks” (Djankov and Miner, 2016, p. 9): – Export-Import Bank of China (China EXIM Bank): USD 30 billion – China Development Bank (CDB): USD 32 billion – Agricultural Development Bank of China (ADBC): USD 20 billion.


2 The second study, also authored by Stephan Barisitz and Alice Radzyner, is titled “The New Silk Road, part II: implications for Europe,” and is scheduled for publication in the OeNB’s Focus on European Economic Integration Q4/17.

3 OBOR was later also called Belt and Road Initiative (BRI). In the following, we will use NSR and OBOR as synonyms.

4 Actually, another New Silk Road initiative was launched two years before OBOR in 2011: the U.S. New Silk Road Initiative (NSRI). However, this is a comparatively modest endeavor both financially and regionally, featuring an important diplomatic component. For more details on the NSRI, see section 3.3.

5 This may invite comparison to early globalization in the Mongol era: The territory of the Mongol Empire (including all its subempires) at its apex (around 1280 CE) is estimated to have covered (almost) the entire Silk Road network of the time, or a quarter of the world’s land surface and almost half of its population (Barisitz, 2017).

6 In addition, at an international New Silk Road summit in Beijing in May 2017 President Xi Jinping announced China’s willingness to inject an additional USD 15 billion into the SRF.

7 Prior to the establishment of the AIIB, the WB had reportedly estimated that Asian demand for infrastructure would amount to some USD 730 billion per year up to 2020, yet the WB and the ADB together have been able to supply only a fraction of that sum. Japan and the United States have (so far) not joined the AIIB.


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